Shareholders in Hengli Industrial Development Group (SZSE:000622) have lost 59%, as stock drops 10% this past week

While not a mind-blowing move, it is good to see that the Hengli Industrial Development Group Co., Ltd. (SZSE:000622) share price has gained 13% in the last three months. But that doesn't change the fact that the returns over the last half decade have been disappointing. In fact, the share price has declined rather badly, down some 59% in that time. So we're not so sure if the recent bounce should be celebrated. However, in the best case scenario (far from fait accompli), this improved performance might be sustained.

Since Hengli Industrial Development Group has shed CN¥94m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

See our latest analysis for Hengli Industrial Development Group

Given that Hengli Industrial Development Group didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. Shareholders of unprofitable companies usually desire strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last five years Hengli Industrial Development Group saw its revenue shrink by 23% per year. That puts it in an unattractive cohort, to put it mildly. It seems appropriate, then, that the share price slid about 10% annually during that time. We don't generally like to own companies that lose money and don't grow revenues. You might be better off spending your money on a leisure activity. You'd want to research this company pretty thoroughly before buying, it looks a bit too risky for us.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

Take a more thorough look at Hengli Industrial Development Group's financial health with this free report on its balance sheet.

A Different Perspective

Hengli Industrial Development Group shareholders are down 54% for the year, but the market itself is up 15%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 10% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand Hengli Industrial Development Group better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for Hengli Industrial Development Group you should be aware of.

We will like Hengli Industrial Development Group better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Chinese exchanges.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.